Ford in China
12:19 am
Fri October 14, 2011

Ford and the case of the Chinese official's hat

Want to know the real reason Ford isn’t one of the biggest car companies in China right now? 

Hats. 

That's right. David McKee says it’s because of hats. Here’s the story. 

In 1992, Ford Motor Company sent McKee to China to head a Ford components company. At the time, very few ordinary Chinese owned cars. Cars were a perk for bureaucrats. 

That same year, the Chinese government decided to replace their Chinese-made limousines with Western-style cars. Shanghai Automotive Industry Corporation (SAIC) was told to find a foreign car company partner and make it happen. 

The company approached Ford, and General Motors.

Ford at the time was spending billions acquiring Volvo, Jaguar and Land Rover. So the company didn’t have a lot of cash.

McKee says Ford still found the proposition intriguing. Pretty soon, word came from Dearborn. 

"Yep, we could do it, and if Ford got the program, Ford would spend the money," recalls McKee, now retired from Ford.

GM had a Buick they could package as a limousine. But the government didn’t want a Lincoln. So the only car Ford had to offer was the Taurus. The original Taurus, with the jelly-bean shape.

Here’s where the hats come in. Most Chinese officials still wore Western-style hats in 1992.

"They could get into a Buick without that hat being knocked off their head," says McKee. "But if they got into the back of a Taurus, the curvature came down too much, and it would knock an official’s hat off."

Ford couldn’t retrofit the Taurus fast enough, and GM got the contract. 

17 years later, when China became the world’s largest car market, GM and its partner Shanghai Automotive Industry Corporation were ready to meet the exploding demand for cars from Chinese customers.

Today, Ford is only number nine in car sales in China – just behind Suzuki. But Ford executives say they have a strategy that will make up for their late start.

Chantel Leonard is Ford’s head of marketing for Asia Pacific and Africa.

She says Ford missed the first wave of customers whose personal income had risen enough to buy a car. The company doesn't plan to miss out on the next wave or the next. 

In the next ten years, 100 million people are expected to pass the income threshold in China at which they start thinking about buying a car ($6,000 U.S.).

To capitalize on the upcoming demand, Ford is building new plants in China, and the company will introduce 15 new models in the next five years -- and double the number of  its dealerships. 

"Right now is a really good time to become a dealer because they’re looking at the business too and seeing this rapid growth," says Leonard. "And they're also seeing the expansion of our product lineup, so we think we’re going to be able to attract some of the best dealer candidates."

Ford is also taking care to nurture its current dealers. That way Ford car buyers will get excellent customer service – and tell their family, friends and neighbors about it. 

Zhou Hui Cheng is general manager of Dongchang Fude Auto Sales, a newly refurbished Ford dealership in Shanghai. He points proudly to a photo of himself with Ford CEO Alan Mulally, who visited the dealership last year.

"He had a lot of interaction and in fact he was even able to give over a car to a Chinese consumer who was buying that day," says Cheng.

Now, Chinese men don’t wear hats as a rule anymore. But Ford Motor Company these days is unlikely to face the same kind of problem that led to the loss of that key limousine contract to GM. While Ford’s strategy is to sell the same basic cars around the world, it will alter portions of a car’s appearance and features to suit local tastes.

This story was informed by the Public Insight Network.

Have you traveled to China? Share your experience here.